Pension. In May 2010, OPTrust became a signatory. Inside: C O N N E C T I O N

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1 Pension C O N N E C T I O N OPTrust becomes a signatory to the United Nations Principles for Responsible Investment In May 2010, OPTrust became a signatory to the United Nations Principles for Responsible Investment (PRI). The PRI is an investor initiative in partnership with the United Nations Environment Program Finance Initiative and the UN Global Compact with more than 700 signatories worldwide and representing US $20 trillion in invested assets. At OPTrust, we recognize that environmental, social and governance (ESG) issues have the potential to affect the performance of the Plan s investment portfolios. Taking steps to address these issues in our investment operations is not just the right thing to do it s also good business. Signing the PRI is consistent with and in support of OPTrust s Statement of Responsible Investing Principles (SRIP) which was adopted in March > OPTrust becomes signatory... continued on page 2 > A newsletter for the pensioners of the OPSEU Pension Trust In this issue 3 Green initiative: OPTrust joins the Carbon Disclosure Project 3 Did you know? 4 OPSEU appoints new Trustee 4 You Asked 5 Thinking of returning to work? What you need to know about re-employment 6 Your online resources 7 Funding update: full 3% member contribution increase needed 8 Facts about Your pension beneficiaries Inside: 2009 Annual Highlights Want to know how your pension plan is addressing the funding impact of our 2008 investment loss? Interested in how OPTrust is building security for the long term? Looking for the latest OPTrust s investment performance? SPECIAL PULLOUT SECTION INSIDE < Brian Howard, OPTrust Retiree, Ministry of Community Safety and Correctional Services Just turn to the special pullout section inside this newsletter to read the 2009 Annual Highlights Report for Pensioners. There you ll find key statistics on the financial performance of the OPSEU Pension Plan and news on how we serve you and our 82,000 other members and retirees. SUMMER 2010 Nº 53 ISSN

2 > OPTrust becomes signatory... continued from page 1 This gives OPTrust access to information and resources we can use to develop better tools for analyzing investment decisions from an ESG perspective. It also connects us with a global network of organizations that we can share ideas with, learn from, and work with on specific ESG issues and initiatives. Signing the PRI represents an important step in OPTrust s continuing commitment to integrating environmental, social and corporate governance considerations into its investment activities, says Morgan Eastman, Chief Investment Officer of OPTrust. This commitment is based on the recognition that ESG issues have the potential to affect the performance of OPTrust s investment portfolios over the long term. Taking appropriate steps to address potential risks in these areas is therefore consistent with OPTrust s fiduciary duty to plan members, retirees and sponsors, adds Eastman. We are delighted that OPTrust has signed the PRI, states James Gifford, Executive Director, PRI. This continues the strong momentum within responsible investment post crisis. OPTrust s participation will add greatly to the PRI s Canadian activities and it has a lot to offer in terms of integration of ESG issues and active ownership within mainstream pension management. Integrating responsible investment practices into the way we manage the fund is consistent with our fiduciary duty and reflects the best long-term interests of our more than 82,000 members and pensioners and our sponsors. Responsible investment The UN Principles on Responsible Investment sets out six broad objectives and identifies a range of possible actions that signatories may take to incorporate ESG issues into their investment activities. The principles provide a framework for extending OPTrust s work in this area. Plans are already in progress to: strengthen OPTrust s policies regarding environmental, social and governance concerns. This includes the recent adoption of a statement on responsible investment which will provide a point of reference for ongoing discussion with our external investment managers work with our investment managers to integrate ESG factors into their investment analyses and decisions and the criteria used to evaluate their performance review our proxy voting guidelines to ensure they address current and emerging issues, including responsible investment criteria identify further opportunities to work together with other investors and stakeholders on ESG issues expand our ESG program beyond our public market investments and identify opportunities to integrate ESG factors into decisions regarding OPTrust s real estate, private equity and infrastructure portfolios. As a signatory to the PRI, OPTrust has made a modest voluntary contribution to support the work of the PRI secretariat. In return, as a signatory, we gain access to resources we can use in developing and implementing OPTrust s ESG program, and a global network of organizations with whom we can share information and work together on corporate governance and responsible investment issues. 2

3 GREEN INITIATIVE: OPTrust joins the Carbon Disclosure Project In 2010, as part of OPTrust s continuing commitment to responsible investing and to managing the long-term financial risks associated with environmental, social and governance issues, we signed onto the Carbon Disclosure Project (CDP). The CDP conducts an annual survey, requesting thousands of the world s largest companies to disclose their greenhouse gas emissions and climate change strategies on behalf of the world s leading asset owners and investment firms. This data provides valuable insight to investors like OPTrust who use it to evaluate investment risks and opportunities related to climate change. There is a growing awareness among large investors that climate change has the potential to impact the long-term financial performance of companies and even the efficient functioning of global markets. Indeed, the Intergovernmental Panel on Climate Change (IPCC) predicts that future climate impacts show that the consequences could vary from disruptive to catastrophic. By collecting and presenting the carbon emissions strategies of companies along with emissions data, the CDP provides investors with a clear understanding of how companies are positioned as we move towards a low carbon economy. Signing the CDP is consistent with OPTrust s Statement of Responsible Investing Principles and is an example of our commitment to the United Nations Principles for Responsible Investing. OPTrust joins over 500 institutional investors with a combined $64 trillion in assets under management who believe that a first step in managing investment risk related to carbon emissions is transparency from the companies in which we invest. By signing onto the CDP, OPTrust obtains exclusive access to CDP responses through a dedicated database and reports that will assist us in our ongoing initiatives to integrate ESG considerations into investment decision making processes and in our potential engagement activities. OPTrust will continue to keep you informed of other areas where we have an impact on environmental, social and governance issues. In the meantime, you can learn more about OPTrust s governance program on our website or in the full annual report. DID YOU KNOW? OPTrust s pensioner population has grown to 25,000 retirees since the OPSEU Pension Plan s inception 15 years ago. Stay tuned to find out who our 25,000 th retiree is in the next issue of Pension Connection. 3

4 OPSEU appoints new Trustee OPSEU appointed Dennis Wilson to the OPTrust Board of Trustees for a three-year term in April During his Ontario Public Service career spanning nearly 30 years, Wilson has worked for the Ministries of Natural Resources, Northern Development and Mines, and Labour. He is currently an Industrial Health and Safety Inspector with the Ministry of Labour. Wilson s union activities have included Steward, Local President, Executive Board Member, Ministry Employee Relations Committee (MERC) Team Member, and positions on several bargaining teams. Dennis Wilson When I started working in the OPS, unclassified employees did not have the option to join the pension plan. OPSEU lobbied for and secured the right for unclassified staff to become plan members, says Wilson. I ve always recognized the value of a strong pension, and this issue has become increasingly important to me as I approach my own retirement. 4 You Asked Question: I have switched banks. How do I update my new account with OPTrust? Answer: You must provide us with a void cheque for your new financial institution or bank account. You may also update your banking information online by registering for OPTrust s secure Online Services. We cannot accept bank account changes over the telephone or by . Question: I ve recently moved. How do I update my mailing address? Answer: It s important to provide OPTrust with your new mailing address. You can update your mailing address through OPTrust s secure Online Services, once you are registered. If you receive your pension by direct deposit, you can contact OPTrust at or to update your address. If you receive your pension by cheque, you must complete a Personal Information Change Request form. Question: Where can I get a copy of the dental claim form? Answer: You can download the dental and medical claim forms from the OPTrust website under the Pensioner section or from the Great-West Life website at Send your completed forms to: Great-West Life Toronto Benefit Payments P.O. Box 4076, Station A Toronto, ON M5W 3A3 You can also sign up for Great-West Life s online GroupNet service, where you can sign up for direct deposit and track your claim submissions. For more information, contact Great-West Life at or Question: I m planning to travel to Europe this fall. Is there out of country travel insurance with my insured benefits coverage? Answer: If you are a full-time resident in another province or country, and are eligible for benefits, your Great-West Life benefits will continue. However, re-imbursements are based on what is customarily paid in Ontario. Within certain limits your coverage will top up expenses the Ontario Health Insurance Plan (OHIP) does not cover. There is no emergency coverage if you travel out of the country. You may want to purchase medical travel insurance.

5 2009 Annual Highlights Report for PENSIONERS special Pullout Section WORKING TOGETHER FOR A SECURE FUTURE At the OPSEU Pension Trust (OPTrust), we are here to serve you. With invested assets of $12 billion, we manage one of Canada s largest pension funds and administer the OPSEU Pension Plan, a defined benefit plan with more than 82,000 members and retirees. Our mandate includes three key objectives: Generating the investment returns needed to support the Plan s pension promise Delivering the finest service and communications to our members and pensioners Ensuring that you have a real voice in your pension plan through joint trusteeship 2009 highlights OPTrust and our sponsors implemented a proactive strategy to manage the Plan s funding shortfall caused by investment losses in A gradual 3% increase in contribution rates for active members and employers was recommended by OPTrust and approved by the sponsors, reducing the Plan s funding deficit by $1.2 billion while maintaining the value of members future pensions. Strong investment returns in 2009 helped reduce the Plan s remaining deficit to $393 million at year-end. Bill Garrett, OPTrust Member, Ministry of Revenue

6 Funding Highlights AFTER CONTRiBUTION INCREASE BEFORE CONTRIBUTION INCREASE 2009 INTERIM 2008 FILED At December 31 ($ millions) VALUATION VALUATION 2008 Net assets available for benefits $ 11,989 $ 10,987 $ 10,987 Actuarial smoothing adjustment Actuarial value of net assets 12,283 11,914 11,914 Present value of future contributions 4,747 4,653 3,414 TOTAL ASSETS 17,030 16,567 15,328 Current cost of future pensions 16,595 16,353 16,353 Rate stabilization funds Surplus (deficit) (393) (606) (1,845) NET SURPLUS (DEFICIT) $ 435 $ 214 $ (1,025) Understanding the numbers In 2009, OPTrust and our sponsors implemented a proactive strategy to manage the Plan s funding shortfall caused by investment losses in This strategy included capping the investment losses that were deferred, or smoothed, for recognition in future years, and gradually raising members and employers contribution rates by 3% of salary, starting in As a result, the Plan s 2008 funding valuation identified a deficit of $606 million, which is being eliminated through payments from the Plan s rate stabilization funds. In 2009, strong investment returns helped reduce the deficit to $393 million. Without the contribution increase, the deficit would have been $1,845 million at December 31, 2008 and $1,716 million at the end of INVESTMENT performance FUNdING SURplUS (deficit) At December 31 ($ millions) (16.2) (16.8) (517) (71) 446 (105) (606) 214 (393) year Since inception OPTrust s return (%) Benchmark (%) Funding target return (%) Surplus (deficit) Rate stabilization funds Net surplus (deficit) OPTrust s diversified portfolio achieved a 13.6% return for 2009, compared to 14.3% for our weighted benchmark and the Plan s 6.75% funding target return. OPTrust s average return of 8.4% since the Plan s launch in 1995 exceeds both our benchmark and the Plan s funding target for the same period. Despite its $606 million funding deficit, the Plan had a net surplus of $214 million at the end of 2008, after accounting for rate stabilization funds of $820 million. These funds were set aside by the sponsors from past funding gains and are now being used to pay down the deficit over a maximum of 15 years. For more information on OPTrust s investment and financial results for 2009, please see our full annual report available at In this report 3 Message from the Chair and Vice-Chair 4 Investment strategy and performance 5 Funding the pension promise 6 Membership services 8 Members of the Board of Trustees Annual Highlights Report for Pensioners

7 Message from the Chair and Vice-Chair 2009 highlights Approved changes to the Plan s longterm asset mix to reduce investment risk while increasing OPTrust s ability to achieve our target return over time. Worked with OPTrust s sponsors to address the Plan s funding deficit and maintain the value of members future pensions, while moderating the impact on contribution rates. Completed a strategic review of our investment program, enhancing both our governance practices and our ability to execute decisions in an increasingly challenging business environment. Meeting challenges, building security The past year was one of significant challenges and opportunities for the OPSEU Pension Plan, its sponsors and our 82,000 members and retirees. Like other major pension funds, your plan experienced a substantial investment loss in the last quarter of 2008 due to the global financial crisis. In 2009, this meant that OPTrust faced two key tasks: addressing the funding impact of our 2008 investment loss, and positioning the Plan to continue achieving long-term investment growth in the future. As we report in this special supplement, OPTrust has made important progress on both counts. As a result, you can continue to rely on the value and security of your OPTrust pension. Investing for the future In 2009, OPTrust undertook a major review of the Plan s diversification strategy. Based on our findings, the Board approved a number of adjustments to our long-term asset mix, which will be implemented over several years. These changes meet two objectives: reducing the Plan s overall investment risk and increasing our ability to meet the Plan s funding requirements over the long term. In the meantime, the Plan benefited from a sharp rebound in public equity markets in 2009, and strong returns from our infrastructure and real return bond portfolios. As a result, OPTrust achieved an overall investment return of 13.6% for the year, more than double the Plan s 6.75% funding target. This strong performance contrasts with our 16.2% investment loss during the market downturn in Over 2009, investment earnings helped increase the Plan s net assets to $12 billion at year-end, up by $1 billion from the end of Given the Plan s funding requirements, however, this one year of growth was not enough on its own to make up for our $2.4 billion investment loss in Deficit management In 2009, an initial actuarial valuation identified a total funding shortfall of $2.7 billion as of the end of 2008, including both the Plan s funding deficit and the smoothed investment losses to be deferred for recognition over the following four years. OPTrust has therefore worked with the Plan s sponsors OPSEU and the Government of Ontario to implement a proactive strategy for dealing with the Plan s funding deficit. The main elements of this strategy included: capping the investment losses that would be deferred for recognition over at $927 million filing the Plan s 2008 funding valuation with Ontario s pension regulator to allow the sponsors to start addressing the Plan s $1.8 billion deficit as soon as possible reducing the deficit by $1.2 billion by implementing a gradual 3% increase in contribution rates recommended by OPTrust and approved by the sponsors phasing in the contribution increase over three years starting in 2010, to moderate the impact on members takehome pay and employers payroll costs drawing on the Plan s rate stabilization funds to pay down the remaining $606 million deficit over the next 15 years. This prudent approach will allow OPTrust and our members and sponsors to meet the Plan s long-term funding needs while maintaining the value of members future pension benefits. Looking forward We wish to express our sincere appreciation to our fellow Trustees and OPTrust s management and staff for their dedication to the interests of our 82,000 members and pensioners. We look forward to working with them and the Plan s sponsors as we continue to meet the pension promise in the coming year, and over the long term. Tony Ross Chair Maurice Gabay Vice-Chair 2009 Annual Highlights Report for Pensioners 3

8 Investment Strategy and Performance 2009 highlights Investment gains helped increase the Plan s net assets to $12 billion in 2009, up $1 billion from the year before. OPTrust s diversified portfolio achieved a 13.6% return for 2009, more than double the Plan s 6.75% funding target return. OPTrust s Board approved a number of adjustments to the Plan s longterm asset mix, to be implemented over several years. As an investment manager, OPTrust s goal is to generate the rate of return needed to provide you with a secure lifetime pension in your retirement. To meet this objective, the Fund needs to achieve our annual target return of 6.75% over the long term. Diversification Our 6.75% target is higher than the returns normally generated by low-risk investments, such as government and corporate bonds. So, OPTrust also invests in other asset classes, including public equity (stocks), real estate, infrastructure and private equity. These investments typically offer the higher returns that OPTrust needs to meet the Plan s funding requirements. However, they involve more risk than fixed income investments and expose the Fund to increased volatility of our returns. OPTrust s diversification strategy is designed to manage this risk. Our approach is to select an appropriate mix of asset classes and markets, and use a diversified range of investment strategies. The goal is to meet or exceed the Plan s target return over the long term, while reducing exposure to risks affecting particular markets or asset types. Investment performance Since OPTrust s launch in 1995, this strategy has served the Plan well. Over 15 years, the Fund has produced an average annual return of 8.4% compared to 7.5% for our weighted benchmark and our 7.3% target return for the same period. Diversification also helped reduce the impact of the extreme market volatility over the past two years. In 2009, for example, a 7.1% loss in our real estate portfolio was more than offset by returns of 34.8% and 31.6% from our Canadian and foreign equities. These strong equity returns were a major factor in the Plan s 13.6% total fund return for the year. This contrasts with the Plan s results for the previous year. In 2008, strong positive returns from OPTrust s real estate, infrastructure and fixed income investments helped limit the Plan s loss to 16.2% in a year when the global financial crisis saw major stock market indexes report losses of 30% to 40%. Asset mix changes Given the importance of our diversification strategy, OPTrust carried out a major asset/liability study in This study tested the expected performance of a range of possible changes to the Plan s asset mix and compared them to the expected growth in our pension liabilities, under different economic scenarios. The result was a series of adjustments to the Plan s long-term asset mix. Taken together, these changes are designed to increase the probability of meeting or exceeding our funding requirements over the long term, while reducing the Plan s overall level of investment risk. The adjustments include: continuing to reduce the Plan s exposure to volatile public equities, which will eventually make up 25% of the total fund increasing both our real estate and private equity allocations to 15% each continuing the implementation of our 15% target for infrastructure adding a 5% allocation to energy commodities maintaining a substantial 20% allocation to government and corporate bonds. These changes, which continue the gradual evolution of our investment portfolio, will be implemented over the next several years ASSET MIX At December % 4.6% 10.7% 7.6% 9.8% 2.7% 2009 actual * 20.3% 24.0% Canadian equities Global equities Private equity Real return bonds Real estate Infrastructure Bonds Cash and short-term investments In 2009, OPTrust continued to limit the Plan s exposure to volatile public equity markets, while maintaining a flexible approach to rebalancing the Fund. An increased allocation to cash and shortterm investments is being used to fund further investments in real estate, infrastructure and private equity and a new energy commodity portfolio. * Categories include temporary cash balances Annual Highlights Report for Pensioners

9 Funding the pension promise 2009 highlights The phased contribution increase approved by the Plan s sponsors in 2009 reduced the 2008 funding deficit by $1.2 billion. Strong investment returns further reduced the deficit to $393 million at the end of Another $294 million in smoothed investment losses will be recognized over the next four years. OPTrust and the OPSEU Pension Plan exist to provide our members with a secure lifetime pension in their retirement years. OPTrust therefore follows a comprehensive funding policy to: project the long-term cost of members and retirees pensions, and manage the Plan s assets and members and employers contributions to meet that pension obligation. Shared risks and rewards Since the Plan s launch in 1995, our funding strategy has delivered real value for OPTrust s membership and sponsors. Based on strong investment returns, the Plan has generated substantial funding gains that were shared equally between the Plan s membership and the Government of Ontario. In their role as the Plan s sponsors, OPSEU and the Government of Ontario used these gains to eliminate the Plan s initial unfunded liability, pay for a number of permanent and temporary benefit improvements and reduce members contribution rates between 2000 and The sponsors also made the prudent decision to set part of these gains aside in separate rate stabilization funds. Totalling $828 million at the end of 2009, these funds can be used to reduce the impact of a deficit on members and employers contribution rates. Deficit management Despite this record of success, the Plan s 2008 investment loss left the Plan with a total funding shortfall of $2.7 billion, including both the funding deficit and deferred investment losses. Over the past year, OPTrust worked with the Plan s sponsors to implement a proactive strategy for managing the Plan s deficit. The result was a balanced approach that: capped the investment losses that were deferred for recognition between 2009 and 2012 reduced the deficit by $1.2 billion by phasing in a 3% contribution rate increase over three years draws on the Plan s rate stabilization funds to pay down the remaining deficit over 15 years, starting in With the support of the Plan s sponsors, this prudent strategy met three key objectives: addressing the current deficit and the Plan s long-term funding requirements moderating the impact on members and employers contribution rates avoiding any reduction in members future pension benefits. The deficit management strategy had no impact on current retirees pensions, which are protected under Ontario pension law and will continue to increase each year to keep pace with inflation. Funding outlook OPTrust s investment performance in 2009 helped reduce the Plan s funding deficit from $606 million at December 31, 2008, to $393 million at the end of The Plan s smoothed investment losses were also reduced to $294 million at the end of 2009, down from $927 million in Assuming a modest recovery in the financial markets over the next four years, we expect that the Plan s rate stabilization funds should be enough to offset the balance of our unrecognized losses from 2008, without a further contribution increase. In the meantime, you can continue to count on the value of your OPTrust pension and the secure lifetime income it provides. NET ASSETS AVAIlABlE FOR BENEFITS At December 31 ($ billions) The Plan s net assets rose to $12 billion in 2009, up by $1 billion from the year before. The increase resulted from investment income of $1.3 billion for the year. This was partly offset by benefit payments and expenses that exceeded contributions by $346 million Annual Highlights Report for Pensioners 5

10 Membership Services 2009 highlights OPTrust completed 85% of cases on time, even though one in five is delayed for reasons outside OPTrust s control. More than 2,300 new users signed up for our secure Online Services site, reflecting the growing demand for online services and electronic communications. During the year, we provided more than 25,000 targeted s and printed notices to inform members and pensioners of important pension options. At OPTrust our focus is to provide members and pensioners with high quality service and communications to help them make informed decisions. During 2009, OPTrust continued to deliver on its commitment to provide prompt, friendly and efficient service while responding to your changing needs. Service standards Over the year, our staff processed 63,151 individual transactions from enrolments, pension transfers and buybacks to pension estimates, terminations and retirements. During the year: we received almost 45,000 calls from our members and pensioners, answering 98% with an average response time of just 11 seconds the total number of secure Online Services registrations grew by 9% as members and pensioners increasingly go online for personalized information and pension transactions we met our service targets, reducing overdue cases to less than 15% of total transactions, while limiting cases overdue by more than 30 days to less than 5%. INFlATION protection FOR pensioners 18,000 18,288 18,581 18,934 19,104 19,391 19,875 20,471 20,799 21,486 21,851 22,332 22,845 23,256 23,837 23, Pension increase (%) Pension amount ($) OPTrust pensions are adjusted annually for inflation to protect retirees purchasing power. In January 2010, payments to pensioners rose by 0.5%, reflecting changes in Canada s Consumer Price Index. A retired member who received a typical annual pension of $18,000 in 1995 will receive $23,957 in 2010 an increase of 33% over 15 years. Brian Howard, OPTrust Retiree, Ministry of Community Safety and Correctional Services I have my own RRSP, but my OPTrust pension is key to my financial security. It s allowed me to spend five summers working as a full-time instructor with the Air Cadets Summer Training Program. When I turned 65, I had to retire as a uniformed officer in the Canadian Reserves, but I m still with the program as a civilian instructor. I m having a wonderful time! Annual Highlights Report for Pensioners

11 Proactive services Membership Snapshot We delivered a range of proactive services to members and retirees to help you maximize your pension and plan for the future. In 2009, OPTrust: sent information about CPP integration and their OPTrust pensions to more than 1,200 retirees who were nearing their 65th birthdays mailed pension estimates to over 9,000 members aged 55 or older sent and printed notices to more than 3,800 contract employees reminding them about their option to join the Plan, with almost 1,300 enrolling over the year provided buyback cost quotes to 1,500 new members sent reminders to another 3,400 members whose buyback application deadlines were about to expire and notified almost 2,000 members by telephone hosted 65 pension seminars and information kiosks, reaching more than 3,000 members throughout Ontario sent 31,125 proactive s to encourage members to sign up to receive their Annual Pension Statements online. Responding to your needs OPTrust also responded to members and retirees increasing demand for online service and communications. Over the year our public website received almost 285,000 visits, up from 2008, while more than 2,300 new users signed up for our secure Online Services site. At December Active members 47,316 47,850 Former members with entitlements in the Plan 1,278 1,782 Pensioners Current 24,758 23,686 Deferred 8,990 8,806 Total members and pensioners 82,342 82,124 OPTrust s active membership fell slightly to 47,316 at the end of 2009, down by 534 from Meanwhile, OPTrust members and pensioners continued to give us high marks for the quality of service we provide. During 2009, OPTrust received more than 600 survey responses from individuals who completed a pension transaction, with an overall satisfaction rating of 8.5 out of 10, up slightly from 8.4 the previous year. In 2010, we will continue providing quality services while exploring cost-effective options for meeting your changing needs. Sandra Orr, OPTrust Retiree, Ministry of Child and Youth Services While I was working, I was also planning ahead for my retirement. Knowing I would have a secure pension was a big part of that plan. Since I ve retired, my pension has allowed me to focus on family issues without having to worry about money. Given how challenging the economy is, it s a relief to know I can count on my pension for the long term. For more member and pensioner profiles, visit the online version of this report or our full annual report at Annual Highlights Report for Pensioners 7

12 Members of the Board of Trustees at December 31, 2009 The OPSEU Pension Trust was established to give members and the Government of Ontario an equal voice in the OPSEU Pension Plan through joint trusteeship. As sponsors, the Ontario Public Service Employees Union (OPSEU) and the Government of Ontario each appoint five Trustees to the OPTrust Board. Together, the Trustees oversee all aspects of the Plan s operations in the interests of our more than 82,000 members and retirees. Tony Ross, Chair* Former Vice-Chair (retired) Merrill Lynch Canada Maurice Gabay, Vice-Chair** Accountant Ontario Public Service Employees Union (OPSEU) Michael Beswick* Senior Vice-President, Pensions (retired) Ontario Municipal Employees Retirement System Scott Campbell* Corporate Chief Information Officer (retired) Government of Ontario Alicia Czekierda** Secretary, Robarts/Amethyst Schools Ministry of Education Richard Johnston* Owner, By Chadsey s Cairns Winery and Vineyard Former MPP and President, Centennial College HOW TO REACH US OPSEU Pension Trust 1 Adelaide Street East, Suite 1200 Toronto, ON M5C 3A7 Member and Pensioner Services Tel: in Toronto toll-free in Canada Fax: @optrust.com This report summarizes certain provisions of the OPSEU Pension Plan. Please note that this report does not create any rights to benefits not provided for in the actual terms of the Plan. In the event of any conflict or omission, the legal requirements of the OPSEU Pension Plan will govern in all cases. Ce rapport est aussi disponible en français. ISSN Ron Langer** Senior Business Advisor Ministry of Economic Development and Trade Mahmood Nanji* Assistant Deputy Minister Ministry of Economic Development and Trade Maureen Whyte** Claims Assessor Ministry of Health and Long-Term Care *Appointed by the Government of Ontario **Appointed by OPSEU Get the big picture OPTrust s full annual report is available online at www. optrust.com. A list of OPTrust s significant investments is also available on the OPTrust website. To order a printed copy of the annual report, please contact us Annual Highlights Report for Pensioners

13 Thinking of returning to work? What you need to know about re-employment During your retirement years, you may decide to pursue full or part-time work. If you re thinking of seeking a new opportunity or working part-time for your former employer, you ll need to know how your pension may be affected. If you work for an employer who does not contribute to the Plan, your pension is not affected. If you are re-employed or engaged by an employer who contributes to the Plan, the impact on your pension depends on your salary and whether or not you re-join the Plan. It is your responsibility to inform a participating employer that you are currently receiving a pension from OPTrust. With membership Depending on your re-employment and your age, you may have the option to re-join the Plan. If you re-join, your pension stops immediately. While you are making contributions to the Plan, you are accruing additional pension credit so when your employment ends, we will re-calculate your pension. Re-employed or engaged A re-employed pensioner is someone who is working for (becomes an employee of) an employer who contributes to the OPSEU Pension Plan. The pensioner is considered engaged if he or she has a fee-for-service contract with an employer who contributes to the Plan. Without Plan membership Your monthly pension is subject to an earnings ceiling each calendar quarter (e.g. January March), if you are i) re-employed or engaged by an employer who contributes to the OPSEU Pension Plan, and ii) if you do not re-join the Plan as a contributing member. Your re-employment earnings maximum is determined by subtracting your quarterly pension income from your final quarterly pre-retirement earnings. The amount left over is the maximum amount you can earn in a calendar quarter from re-employment before we reduce your pension. This amount is provided on your confirmation statement from OPTrust and your Pensioner Information Change Statement. OPTrust will add the additional credit you earned during your re-employment to your previous credit (whether you retired under the Factor 80, Factor 90 or 60/20 provisions or at age 65). OPTrust then re-calculates your pension at the end of your re-employment period to include the additional credit you accrued. However, if you were previously receiving a reduced pension, your new pension amount will be actuarially adjusted to take into account any pension payments you have already received. For more information on re-employment, contact OPTrust. 5

14 Your online resources: learn more about your pension at your fingertips During 2009, our public website received almost 285,000 visits. Increasingly more and more pensioners and members are going online to learn about key features of their OPTrust pension. From estimating your retirement income to integration with the Canada Pension Plan to tax deductions and naming beneficiaries, OPTrust s resources offer information on a range of topics. Online Resources Website The OPTrust website offers a wealth of information to help answer your pension-related questions, targeted to different audiences: pensioners, members and employers. While online you can download forms, view OPTrust s pension pay dates, learn how to update your beneficiaries and change your mailing address from our website. You can access news highlights, frequently asked questions for pensioners, and publications directly from the home page. Pension Connection Go green and receive your newsletter electronically. All you need to do is sign up for OPTrust s secure Online Services. If you re already registered for Online Services you will receive Pension Connection electronically. OPTrust will send you an notice when each new issue of the newsletter is posted to our website often a week or more before the print version is in the mail. Online Services An increasingly popular feature on the website is our secure Online Services. Once registered you have access to your personal pension information, in a secure environment. With Online Services you can: view your current Pensioner Information Change Statement update banking and TD1 information view insured benefits coverage view a copy of your current T4A update beneficiary information update and mailing addresses. Simply click on the Online Services icon in the top right-hand corner of the OPTrust home page to register or log in. Retirement Income Calculator Your OPTrust pension may be just one component of your retirement income. If you have other sources of income such as RRSPs, investments or Government benefits (Canada Pension Plan and Old Age Security), OPTrust s retirement income calculator will help you estimate your potential retirement income from all sources. Using the calculator you can view personalized charts and graphs highlighting your retirement income. While online, you can find out how your pension is integrated with the Canada Pension Plan after age 65. To use the calculator, you will need to enter the current date as your Projected Retirement Date. 6

15 FUNDING UPDATE: Full 3% contribution increase needed L ike other major pension funds, the Plan experienced a substantial investment loss in 2008 due to the global financial crisis. As described in the 2009 Annual Highlights Report, included with this newsletter, that loss has had a significant impact on the Plan s funding. In 2009, an initial actuarial valuation identified a total funding shortfall of $2.7 billion as of the end of This shortfall included both the Plan s funding deficit of $1.8 billion and deferred (or smoothed ) investment losses of $927 million, to be recognized over the following four years. Deficit management In response, the OPTrust s Board of Trustees, together with our two sponsors OPSEU and the Government of Ontario acted quickly to implement a proactive strategy for managing the deficit. Central to this strategy was the decision to implement a gradual 3% increase in member and employer contribution rates, rather than reduce members future pension benefits. The contribution increase is being phased in over three years starting in 2010, to reduce the immediate impact on members take-home pay and employers payroll costs. In the meantime, OPTrust s investment portfolio performed strongly in 2009, generating a return of 13.6%. This was double the Plan s 6.75% annual funding target return, which the Fund is expected to achieve over the long term to pay for member s and retirees pensions. Given this strong performance in 2009, OPTrust was asked by the Plan s sponsors to review whether the third 1% increase in contribution rates, scheduled for 2012, would still be required. Funding requirements In 2009, investment income helped increase the Plan s net assets to $12 billion at year-end, up by $1 billion from the end of Given the Plan s funding requirements, however, this one year of growth was not enough on its own to make up for our $2.4 billion investment loss in In fact, our analysis has determined that the Plan would need to achieve a return of at least 15% in 2010 to be able to avoid the third 1% increase in contribution rates. Due to the continued volatility in global investment markets, however, OPTrust s investment return for the first six months of 2010 was below the Plan s 6.75% funding target return on an annualized basis. As a result, unless there is a very significant rebound in capital markets for the latter half of 2010, eliminating the third contribution increase is not an option. While the approved 3% contribution increase and the Plan s 2009 investment return have significantly reduced the Plan s funding deficit and smoothed losses, the Plan s current gains are not enough to avoid the full 3% contribution increase particularly in light of the continuing high levels of investment market volatility. In the meantime, OPTrust s Board of Trustees, our senior management and our external actuarial consultants will continue to monitor the Plan s funding status. Look for more funding updates and how we are working to ensure the security of your OPTrust pension in future issues of Pension Connection. For more information on the OPTrust s deficit management strategy and the Plan s funded status, see the 2009 Annual Highlights Report included with this issue of Pension Connection. Impact of contribution increase The phased contribution increase approved by the Plan s sponsors in 2009 reduced the 2008 funding deficit by $1.2 billion. The remaining deficit of $606 million is being eliminated through payments from the Plan s rate stabilization funds over 15 years. In 2009, strong investment returns helped reduce the deficit to $393 million and the net smoothed investment loss to $294 million. 7

16 * Like your own pension, your spouse's survivor pension is reduced on your 65th birthday to reflect CPP integration. F E B R U A R Y P E N S I O N B E N E F I C I A R I E S Facts About Your pension beneficiaries As an OPTrust pensioner you can count on a pension payable for your lifetime. You can also count on your pension to provide benefits for your eligible survivors after you die. That is why it is a good idea to confirm that the beneficiary information you have provided to OPTrust is up-to-date. You can start by checking your Online Services account or your Personal Information Change Statement (PICS). If the information on your statement is incorrect, you can update your records immediately using OPTrust s secure Online Services or send us the paperwork by completing OPTrust s Pension Beneficiaries form. You should update your information when you: have an eligible spouse or end a spousal relationship have a child want to add or change your other beneficiaries Need to update your records? Simply log on to your secure Online Services account and click the Manage My Beneficiaries button. From there you can change or update your records in three easy steps. If you have a new spouse, you will need to contact OPTrust to update your record. > Fact Sheets contain in-depth information on select topics for members of the OPSEU Pension Trust Fact Sheet Your pension beneficiaries Why is it important to identify your beneficiaries? Your OPTrust pension provides benefits for your survivors. If you identify who you want to receive those benefits, OPTrust can administer payment of your survivor s benefits according to your wishes. Usually, your surviving spouse will automatically receive survivor benefits when you die. But you may not have a surviving spouse or your spouse may have waived entitlement to survivor benefits. Benefit payment varies depending on whether you die while employed or after your pension starts. This fact sheet explains who is eligible to receive your survivor benefits. Survivor benefits BENEFITS TO YOUR SURVIVING SPOUSE To receive survivor benefits after your death, your spouse must meet the Plan s eligibility criteria. See page 4 for the definition of eligible spouse. If you die before retirement and you have an eligible spouse, your spouse automatically receives survivor benefits. These are usually 60% of the pension you were entitled to receive.* This can usually be taken as a pension or a lump sum payment. If you die after retirement and you have an eligible spouse, your spouse automatically receives a survivor pension based on 60% of the pension you were receiving.* INCREASING THE SURVIVOR PENSION The 60% survivor pension is provided to your surviving spouse at no cost to you. However, you may choose to increase the survivor pension. In that case, we calculate the cost and reduce your pension accordingly. You must apply using the Application for Increased Survivor Pension form before you retire. If you apply at least two years before your pension begins, no medical information is necessary. If you apply within two years of your retirement, OPTrust requires a Certificate of Health form and OPTrust must approve your application. Please note that once your pension begins, if your spouse dies before you do, you cannot cancel the survivor pension and you will continue to receive a reduced pension. BENEFITS FOR CHILDREN OR OTHER BENEFICIARIES Benefits are payable to eligible children in some instances. For details on how survivor benefits are paid to your beneficiaries, see the chart on page 3. If you want your children to receive any survivor benefits, list them as beneficiaries on the Pension Beneficiaries form or in Manage My Beneficiaries in Online Services. If your eligible children are under 18, you may wish to establish a guardian of property. Please see the fact sheet Survivor Benefits and Minor Children available on our website. To identify or update your beneficiaries, go to the Manage My Beneficiaries page in OPTrust s secure Online Services site or complete the Pension Beneficiaries form. To access Online Services or download the form go to Who qualifies for survivor benefits? More information on naming your beneficiaries, eligibility requirements and how survivor benefits are paid is in our fact sheet Your pension beneficiaries available online at Pension C O N N E C T I O N Pension Connection is a newsletter for pensioners of the OPSEU Pension Trust. Its goal is to provide useful and timely information about the OPSEU Pension Plan. If there is any conflict between statements in this newsletter and the legal documents of the OPSEU Pension Plan, the legal documents will prevail. Please direct any questions about your personal benefits under the Plan to OPTrust. You should contact OPTrust before making any pension-related decisions. If you have any questions or comments, please contact us. How to Reach Us OPSEU Pension Trust 1 Adelaide Street East, Suite 1200 Toronto, ON M5C 3A7 Member and Pensioner Services Tel: in Toronto toll-free in Canada Fax: @optrust.com Return undeliverable Canadian addresses to: OPSEU Pension Trust 1 Adelaide Street East Suite 1200 Toronto, ON M5C 3A7 Publications Mail Agreement Pension Connection is printed on 100% post-consumer recycled paper.